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basis of a fiscal year ending July 31, and Pak West used a fiscal
year ending September 30.
During the years at issue, Career’s business was divided
into two major segments: (1) Providing air freight, air charter
and aircraft leasing services; and (2) purchasing and selling
used aircraft and parts. Pak West came into existence in late
1992 as an air carrier providing air cargo services.
For its fiscal year ending July 31, 1992, Career timely
filed its Form 1120, U.S. Corporation Income Tax Return, on
October 15, 1992. The Robinsons also filed a timely Form 1040,
U.S. Individual Income Tax Return, for their 1992 calendar year
during March 1993.
Sometime during 1995, the Robinsons’ 1992 and 1993 returns
were selected for audit. Subsequently, the audit was expanded to
include Career and Pak West. During the audit the Robinsons
executed Forms 872, Consent to Extend the Time to Assess Tax,
consenting to the extension of the assessment period for their
1992 individual return until December 31, 1997. No consents to
extend were executed for Career with respect to its fiscal year
ended July 31, 1992, and the period for assessment for that year
expired on October 15, 1995.
Respondent did not issue a notice of deficiency with respect
to Career’s 1992 fiscal year and, accordingly, Career’s
questionable items of expense were not disallowed. On December
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